Begegnungen
Schriftenreihe des Europa Institutes Budapest, Band 28:181–189.

KATALIN TÁNCZOS

Harmonisation Tasks in Transport in an Enlarging European Union

Introduction

Prior to the 2004 enlargement of the European Union several legal, economic, financial and institutional regulatory tasks were solved that concerned the development and operation of the transport systems of the acceding countries. The primary aim of those measures was to promote the preparation of the acceding countries for integration.

The almost two years of experience of Hungary’s European Union membership have shed light on the fact that the transport systems of the old and new member countries may put significant obstacles in the way of developing and expanding passenger and goods transport contacts and services at European scale despite careful preparations because of the significant differences in the level of supplies and operation that can be found in the development of the transport infrastructures.

The Aim of Enlargement and Conditions of Competitiveness

The gradual enlargement of the EU reflects the realisation of the fact that the economic systems working under integrated market conditions in the globalising world trade ensure more favourable conditions compared to the nation states operating independently of each other. The EU comprising an ever growing population and new geographic areas can, however, only compete successfully with other regions of the world which are already concentrated in various forms of economic integration, if in addition to the building and enlargement of the transport network it also cares for the development and coordinated operation of communication and transport services linked to one another like chains, and at the same time it creates adequate conditions for the growing internal mobility of the newly acceding areas.

The uniformity and harmonisation of the legal system of the economic units (acceding Member States) involved in integration is indispensable to the general assertion of the community achievements of the European Union realising the free movement of persons, goods, services as well as information and capital. The enactment of a uniform law containing the development and operational rules of institutions has to be carried out, and the rules guaranteeing their observance should be elaborated on national level together with the creation of the conditions of application as well as of the necessary set of institutions.

Experience shows that the development of the economic, financial, institutional conditions of operation and their realisation with regard to the actual and practical circumstances usually take up a longer period of time. Central national budget and EU financial resources are available only to a limited extent for the development of transport, and the mobilisation and production of the necessary private capital is also a difficult task.

Strategic Aims of the Common Transport Policy

The future enlargement of the EU may ensure several additional advantages for the citizens of a gradually united European economy besides the possibilities of the southern marine accession resulting from the geographic location. The opening of new markets of absorption, reaching targets offering advanced tourist services and the development of new inland shipment routes are among these advantages. The utilisation of the possible advantages presupposes the inclusion of those strategic aims laid down in the common transport policy of the EU that are relevant for the region into the national development plans for transport.

The following should be stressed from among the strategic aims of the common transport policy of the EU from the angle of the Balkan region:

– Improving the balance among the modes of transport

• by according preference to environment-friendly modes,
• by ensuring the priority of public transport,
• by enhancing the share of combined transport;

– Eliminating bottlenecks

• by developing the suitable junctions,
• by building places of linkage,
• by increasing the number of meeting points for changing modes,
• by establishing terminals;

– Placing the users to the focus

• by expanding services and improving standards,
• by ensuring information supply,
• by enhancing comfort,
• by increasing flexibility,
• by creating a differentiated supply,
• by a careful assessment of the proportion between use value and price;

– Managing transport globalisation

• by observing all the conditions related to the safe transportation of hazardous goods,
• by preventing damages and their proper handling,
• by ensuring ’security’,
• by averting the danger of terrorism.

Such a system development based on uniform principles would be needed also in the Balkans to be able to realise strategic aims, which, instead of projects implemented separately earlier in the different branches of transport would next focus on integrated, inter-operational interferences thus asserting synergic effects, too.

An Integrated, Inter-Operational, Multimodal Development of Transport

In the future, when the set of means for realising the aims of the common transport policy is chosen in the countries wishing to accede to the EU it would be expedient to consider conditions of compatibility. At the development of infrastructure along the transport corridors affecting the region, efforts should be made to satisfy a differentiated demand for passenger and cargo transport which should be at the highest possible level of service (time, speed, transport tariffs, fees for track use, etc.).

The possibility of the different kinds of transport modes should be realised by the inclusion of suitable points of junction (transfer/transhipment), observing the principle of modularity. Efforts should be made to develop transport/supply chains that can be reshaped, gradually expanded and hence become flexibly adjustable to the changing market demand. In the future the development of transport is only possible in an EU-conform way if so-called inter-operational solutions are built into the system capable of routine co-operation as a result of the consistent implementation of the respective European standards which would offer integrated or complex services accompanying mobility.

In order to illustrate the complexity of tasks lying ahead of the Balkans a survey of regulatory issues is given in the following which are related to the institutional development and pricing of the specific (rail- ways) sub-branches as well as the competitiveness of some prominent sub-systems of public transport.

Sub-branch – (railway) specific regulations

Following the structural transformation of the railways, which began in Europe in the 1990s, the liberalisation of the railways has been gaining space in an increasing number of countries. In 1996 the directives on licensing railway enterprise (95/18. EC) and the distribution of railways infrastructure capacity as well as the setting of infrastructure fees (95/19. EC) were introduced for the purpose of formulating the main guiding principles and prescribing the rules valid for all European countries.

As a result of corrections and modifications after the transformations initially causing disturbances of disintegration, which occasionally could be interpreted as operational disorders occurring frequently and causing even grave accidents, the European Parliament and the Commission amended the 91/440 directive of the European Economic Community by the 2001/12. EC directive to promote implementation and with regard to the changes that had taken place in the railway transport sector in February 2001. Besides separating basic functions related to the railway infrastructure and railway safety the creation of a regulatory body in implementation as well as in control was among the additions. Directive 95/18. EC was amended by measures aiming at the development of a common system of licensing (Directive 2001/13. EC) so that reliable and adequate levels of service as well as transparent, fair and non-discriminative procedures may be ensured. It was necessary because rights of access to railway track were expanded in some EU Member States.

Directive 95/19. EC did not contain a clear rule for the distribution of railway infrastructure and for the collection of track-use fees; therefore several variants have emerged for determining the fees of railway track use as well as its extent and the form and duration of the procedures of distributing track capacity. The European Parliament and the Commission replaced the former Directive pertaining to the issue by Directive 2001/14. EC.

In summary the changes of regulations to be implemented in the sub-branch are contained in the so-called railway packages as follows:

– Legal alignment of the first railway package:

• Directive 91/440/EEC (2001/12/EC),
• Directive 95/18/EC (2001/13/EC),
• Directive 2001/14/EC.

– The second railway package:

• Directive 2004/51/EC
• Directive 2004/49/EC.

The elaboration of the third railway package aiming at further efforts towards uniformity in the quality of service is in progress.

The obstacles related to the domestic realisation of the regulatory processes presented above are indicated by the fact that though Hungary became a member in 2004, the transformation of the railway organisation was delayed because the new Act on railways entered into force only on 1 January 2006, when the Railway Office was also set up watching as an independent organisation over the observance of the EU-conform rules of the distribution of service lines. Cargo transport separated from the organisation of the Hungarian State Railways also started its autonomous operation on 1 January 2006. The separation of the track from passenger railway transport has begun, but the conditions of autonomous operation would also be developed in 2006.

Regulations ensuring competitiveness in public transport

Under the influence of market liberalisation accompanying accession to the Union the regulated, monopolistic public transport market has been transformed, its set of operational conditions was changed and competition has become keener. Market-oriented company operation, the assessment of needs, and providing services corresponding and exceeding demands have come to the foreground in public service activities. A precondition of Euro-compatibility is the shaping of the transport infrastructure in accordance with the market demand, which means the development of quality, the improvement of the market and the efficiency of access to the market, the creation of a system equally considering the conditions of the region as well as the Union rules, and mutually supplementary and linked, integrated system of services.

In public railway and coach transport and particularly in the long-distance one conditions of competition already prevail in Hungary, encouraging the service providers separated from the infrastructure to improve quality. These modernisations for a higher standard of service have not only resulted in the renewal of tracks and vehicles, or the acquisition of new means but the modernised solutions of traffic organisation (such as phased timetables) and passenger information have also appeared, and preparations have begun for the introduction of the electronic ticket system and collection of toll in urban as well as distance transport.

It is worth pointing out in relation to the domestic adaptation of the regulation of road toll collection that because of the special economic and social situation after the system change (transitory fall of the per capita GDP, inadequate density of motorways, a significantly lower solvent domestic demand, a significant proportion of tourist and transit traffic, etc.) in the Central Eastern European countries, including Hungary, an economically also effective solution (electronically collected road toll planned to be introduced in the longer run) can only be applied after the acquisition of several negative experiences, with significant delay in the future.

Institutional reforms in transport

The system of the associations of regional railways and transport is wide-spread in several countries of the EU. This solution has made the alteration of the earlier structure of the institutions involved necessary, together with the radical transformation of relations among them and of the operational principles. It has become important to know what the precise price of a service is, for it is only on this basis that a modern commissioner–performer relationship can be evolved between partners in contractual relationship.

Usually the following conditions have to be met to ensure the ability of operation:

– The state/local government has to repay the justified spending not covered by income without fail in the case of the railway as well as service provision as part of a transport association as stipulated by law;

– The companies have to be relieved of past debt (economic rehabilitation);

– The harmonisation of the various forms of community transport has to be ensured by legal norm (perhaps in an Act on passenger transport), which would specify the framework of regulated competition and co-operation;

– Tasks, competencies and responsibility have to be transferred to a lower level on the basis of the principle of subsidiarity together with the related resources of financing (refunding of cost).

The essence of the model evolving new contractual relations is that the local governments set up a ’commissioning’ company, which signs a public service contract with the state and would be the subject of state subsidy. This company would purchase services from the railways and other transport providers on the basis of tenders.

Though efforts for modernising the institutions of transport as indicated above have emerged in the past decade in domestic transport (such as the Budapest Transport Association, and contracts preparing the setting up of regional railway companies), presumably years will have to pass in waiting for the all-round practical realisation of transformation and its widespread practical coverage, primarily because of the continuously postponed reform of the large systems (state budget).

Social Cost-Based Pricing in Transport

The Directorate of Transport of the EU has been engaged for years in the problems of the social cost of transport as well as of the social marginal cost in the interest of evolving fair and efficient transport prices. The aim of these researches is to build directives in the EU for pricing in transport on the basis of these pieces of information in the longer run. Several attempts have been made to determine the various items of cost. The most recent research results enable the definition of a method on the basis of which it will become possible to elaborate the national accounts and marginal costs uniformly, comparing the interests of the various countries and sub-branches. Naturally, the methodology is open in the sense that the degree to which basic data are available does significantly influence the choice between the recommended processes of calculation: in case of good quality basic data it is worth using more complicated methods yielding more reliable results, whereas in the case of deficient or excessively aggregated input data it is expedient to use the simpler ones but ensuring less informative results, but with a detailed description of the limiting conditions.

The social cost-based approach differentiates among the following cost accounts:

– Infrastructural costs;

– Costs of transport service providers;

– Users’ costs;

– Costs of accidents;

– Environmental costs.

With the modern methodology of the transport pricing systems the social cost and income structures of the sub-branches of transport can be produced, the total cost appearing on social level can be identified, and the various average costs can also be deducted from it and from the transport outputs (specific social cost per unit of transport output, i.e. of vehicle km). The latter ones constitute the possible solutions of social-level transport pricing. Several marked scientific trends exist, however, according to which transport pricing based on the average social costs does not, or at least not in every case yield a satisfactory solution. These approaches primarily mark the social marginal costs as pricing factors, though in some cases they do acknowledge the effects of average costs on the definition of prices.

The marginal costs of transport are defined by the entry of a new unit of transport output, usually by an additional vehicle km into the system producing additional cost. It is assumed that the capacity of the infrastructure is constant in the period under survey, but the stock of vehicles may change.

The exploration of the social marginal costs of transport is done along the categories applied at the structure of costs. Here, however, the absolute cost values are insufficient, but the relationship between factors influencing cost (cost drivers) and costs (ideally to be given as functions) should also be studied. This is what may lead to the expression of social cost functions, or at least to their approximation, from which one may reach the marginal costs by differential calculation (or by some substitute method). The introduction of the method is still hindered by several factors. Their main groups are the following:

– Technological and practical factors;

– Regulatory and institutional shortcomings;

– Limiting factors related to acceptance.

The majority of the domestic transport costs and tariffs is currently far from being in line with EU objectives, in other words they do not reflect a solution based on the principle that “the user and the polluter should pay”. Due to the lack of the respective detailed data of costs and the relatively narrow implementation of the modern methods of cost calculation and controlling so far only the related domestic research results can be accounted for, and a longer period of time is still required to their broad practical introduction.

Lessons, Tasks and Conditions of Realisation

It becomes clear from a brief survey of the EU-conform regulation of transport that several useful pieces of advice can be formulated on the basis of domestic experiences for countries wishing to accede.

Without wishing to be comprehensive it seems justified to emphasise the following:

– Steps of lesser significance and promoting market-oriented operation (such as the liberalisation of road goods transport) should be taken as early as possible, and for this aim the state must grant consistent support again under market-conform conditions, but only to the development of suitable size of companies;

– Supporting the operation of the public transport systems (such as urban public transport) or the implementation of reforms related to financing the building of public roads should be timed after the reform of the state budget;

– In order to have the tolls accepted special attention should be paid to making the users get acquainted with the aims, and a “report” should be made about the additional incomes thus accruing;

– It is expedient to ’treat’ resistance related to the significant changes that are planned to be introduced in the transport market with properly evolved, consistent strategy packages, and to encourage their wide-spread dissemination;

– It is expedient to prepare preliminary impact assessments and the possibilities of control and monitoring should be created.

Naturally, regular training and continuous information are indispensable preconditions to the successful implementation of the new methods of transport regulation surveyed and analysed here.

References

Tánczos Katalin–Farkas Gyula: Railway Infrastructure Charging in Hungary – Key Implementation Issues. IMPRINT EUROPE (Implementing Pricing Reform in Transport – Effective Use of Research on Pricing in Europe) Seminar, Leuven, 13–14 May 2003.

Tánczos Lászlóné–Bokor Zoltán: A közlekedés társadalmi költségei és azok általános és közlekedési módtól függő hazai sajátosságai. (Social Costs of Transport and their Domestic Specificities in General and Depending on the Transport Modes.) Közlekedéstudományi Szemle, 2003. 8. 281–291.

Tánczos Lászlóné–Bokor Zoltán: A közlekedési adók és díjak reformja. (Reform of Transport Taxes and Tariffs). Közlekedéstudományi Szemle, 2004. 1. 5–10.

Tánczos Lászlóné–Bokor Zoltán: A korszerű közlekedési árképzési rendszerek hazai bevezetési feltételeinek elemzése. (Analysis of the Conditions of the Introduction of Modern Pricing Systems in Hungarian Transport). Közlekedéstudományi Szemle, 2004. 2. 50–57.

Tánczos Lászlóné–Bokor Zoltán: A társadalmi költségeken alapuló közlekedési árképzési rendszerek gyakorlati adaptációs lehetőségei (The Possibilities of the Practical Adaptation of Pricing Systems in Transport Based on Social Costs). Közlekedéstudományi Szemle, 2004. 5. 185–192.

Begegnungen

Schriftenreihe des Europa Institutes Budapest, Band 28:89–94.

MÁRTON SZABÓ

The Agriculture of Macedonia – a Small Tiger or just a Cat?

Though the land area of Macedonia is relatively small, it had played a significant role in the food supply of the former Yugoslavia, and several Macedonian products are still to be found in the markets of the neighbouring countries. The topographical and climatic conditions of the country are highly variegated – experts often compare the country to a chess board –, which provides opportunity to cultivate several kinds of plants. Agricultural production has solid traditions. With regard to these circumstances it seems reasonable to ask whether it can be expected of Macedonia to conduct a successful agricultural offensive in the coming decade, and whether there would be a Macedonian success story.

The land area of Macedonia is 23 thousand km^2, its population was 2 million 66 thousand in 2004, which is approximately one fourth or fifth of Hungary. The country is poor: in 2002 the per capita gross domestic product was USD 2429, which was only one fifth of the Slovene, one third of the Hungarian and half of the Croatian index. During the past years Macedonia received significant aid and support from the developed countries and primarily from the European Union.

It is a development of major political and economic significance that the country officially became a candidate for EU membership in December 2005. Thus, it has acquired a prestigious position next to Romania and Bulgaria whose accession is foreseen 2007, and to Croatia already conducting accession talks, taking precedence over Albania, Bosnia-Herzegovina and Serbia and Montenegro. It should be noted, however, that while earlier the candidate country status automatically entailed the opening of accession negotiations, this is not the case for Macedonia. As it was once wittily formulated, a new anteroom was invented for the country in Brussels.

The Agriculture of Macedonia

In line with the country’s lower level of development the proportion of agriculture in the production of the gross national product is still 10% per cent, though decreasing. In comparison: this index has dropped to 3–4% in Hungary during the recent years. According to official data 11% of the employees work in the agricultural sector, whereas this figure is only 5% in Hungary. If the self-sufficient farms were also considered, the Macedonian index would be even higher.

Individual farms cultivate 80% of the arable area with an average size of 2.4 hectares. A fragmented operational structure is even more dominant there than in Hungary, where only 40% of all the agricultural area is owned by individual farms of an average size of 3.5 hectares. In Macedonia economic associations, the successors of the former agro-combines operate on the remaining one fifth of the agricultural area. The standard of their cultivation lags far behind that of the private farms; the yields are often significantly lower. It should not be forgotten, however, that private cultivation had been continuous even in the period of socialism in Macedonia. At that time the size of private farms was limited to ten hectares, a far more ’liberal’ restriction than the 0.5 hectare in Hungary.

In contrast to most countries of the Central-Eastern European region, Macedonian agriculture did not experience any significant drop in production even in the years of transition. It has several reasons. A large part of the agricultural sector had not been privatised because of the survival of landed property and the related organisational and structural transformation did not take place either. Privatisation of the agro-combines representing a smaller part of the sector began relatively late, at the end of the 1990s, and was completed only recently. The proportion of exports was not as big as in the case of Hungary where the dissolution of the CMEA automatically meant the loss of a large part of the markets at once; Macedonian exports to the neighbouring countries mostly survived the 1990s. The fall in real incomes was also less significant than in most Central-Eastern European countries. Finally, the high share of subsistence farming with in the total food consumption is an important difference, and hence the production of the sector and this circle is less affected by macro-economic and market shocks.

The production structure of the Macedonian agriculture would not be an obstacle to EU accession. The country would not increase the surpluses of the Union except for wine and tobacco, and the small Macedonia may provide a small outlet for the surpluses causing a major problem in the Union.

There are branches of major significance as well as net exporters in the Macedonian agricultural structure. These include vegetable production (primarily tomato, pepper, cabbage) and fruits (mostly table grape, plum), as well as wine production, tobacco and sheep breeding (milk and meat).

Branches of relatively smaller significance in the products of which the country is not self-sufficient and hence requires continuous import are the following: cattle, pig and poultry, grain, oilseed and sugar beet production.

Agricultural Foreign Trade

As a result of Macedonia’s favourable compatibility with the agricultural structure of the Union the majority of food imports already comes from the EU, including meat, sugar and dairy products. Of the latter the significant export to Slovenia is worth mentioning. Poultry meat import from the USA is also significant.

Similarly, the main export market is also the European Union, primarily Germany (wine, tobacco) and Greece (mutton). Vegetable exports to Serbia and Montenegro are also significant.

Currently the country uses only a fragment of the opportunities in international trade, and the intensity of trade is low. Opportunities in exports have by far not been exploited. In 2004 agricultural export totalled only 210 million euros (hardly 7% of Hungarian agricultural exports), and the import was 331 million, the deficit of agricultural foreign trade was 121 million euros.

The international liberalisation of agricultural foreign trade represents a major test also for Macedonia that has traditionally conducted a rather protectionist trade policy. According to the WTO accord the level of agricultural import weighted by turnover should be reduced from 28 to 7% between 2002 and 2008.

The Stabilisation and Accession Agreement (SAA) concluded with the European Union sets no smaller requirement but the reduction of the average agrarian import customs level from 21 to 7% as well within the same time bracket of 2002 and 2008. Simultaneously Macedonia was granted rather significant customs cuts, and even was exempted of customs in the case of most products by the EU.

The Agreement signed with the EU handles individual agricultural products on the import side as follows:

– The import of goods produced in small quantities, the so-called non-sensitive products (tropical fruits, seed, live animals, etc.) has become customs-free in Macedonia;

– The country is not self-sufficient in the case of articles of medium sensitivity and requires significant quantities of import (vegetable oil, dairy products, etc.), where gradual customs reduction would be applied parallel to increasing customs quotas;

– For the so-called sensitive products (vegetables, fruits, wine, mutton, sugar, etc.) that are particularly important for agricultural incomes as well as products of surplus-producing branches customs reduction would begin only in the coming years, until then the current high, 30–60% protective customs tariffs would remain in place.

Finally, the complicated system of bilateral trade agreements concluded with the former Yugoslav republics as well as with other countries of the region (including even Ukraine and Moldova) in the recent years should be mentioned, which are expected to be replaced by a multilateral free trade agreement in 2007.

The Competitiveness of the Macedonian Agriculture

The Macedonian agriculture has several favourable characteristics. The most important ones are the following:

– Favourable climatic endowments;

– A mostly clean environment;

– A favourable geographical location: relatively close to the EU markets, along the European logistics corridors;

– Abundant and cheap labour;

– Skills and traditions in production (for example of vegetables and wine);

– The Macedonian foodstuffs are acknowledged and introduced to the markets of the neighbouring countries;

– The Macedonian consumers mostly favour domestic products as against the imported ones.

The ’list of faults’ of the Macedonian agriculture, however, is much longer. The following items are only the most important ones:

– Small-scale structure, in addition even small holdings may consist of several plots of land;

– Horizontal co-operation among the producers is weak, as a result of which the supply concentration is low and the bargaining position against the buyers is weak;

– Vertical coordination (contacts between producers – merchants – processors) is primitive; ad hoc market relations are typical, there is little permanent contact between producer and merchant/processor;

– The lack of organisation and information often results in excessive production (from one year to another many farmers start to deal with fashionable goods that produced a good income in the previous year);

– The contracts often cannot be enforced;

– Low productivity of labour;

– A significant number of farmers are unable to develop, they refuse to change the old-fashioned methods;

– Entrepreneurial thinking is missing;

– There is weak market orientation among the producers whose basic attitude is to produce and wait for the merchant to find them;

– The applied agro-technology is outdated in many places;

– Propagation material is of low quality;

– Less marketable species are grown (e. g.: apple, sour cherry);

– There is a particularly big lag in the so-called post-harvest activity (freezing, storing, sorting, classification, packaging) in the vegetable and fruit branch;

– Scarcity of capital (in respect of investments and working capital, too);

– The producers have hardly any access to loans;

– The general standards of products of international trade are hardly known and applied (for instance for vegetables and fruits);

– The level of subsidies is rather low (the sum total of agricultural subsidies corresponded to HUF six thousand million in 2005, whereas the producers got sixty times as much in Hungary);

– The agricultural administration is understaffed and of deficient preparedness, which is a bottleneck also from the perspective of getting prepared for accession;

– There is no market information system;

– The system of professional advisors operates poorly: it has few personnel, the technical equipment is deficient, and its activities are not market-oriented;

– The complicated and lengthy procedure of border crossing makes exporting difficult.

Which Agricultural Products Could Offer Chances
to Macedonia?

Generally speaking the following groups of products may offer opportunities in the domestic and external markets:

– Labour-intensive products (due to the low cost of wages);

– Foodstuffs of expanding demand;

– Products of relatively low excessive supply in the Union;

– Bio-products (making use of the clean environment and the fact that traditional agricultural production uses little input due to the limited resources, therefore a significant part of it can be regarded already as quasi bio-product).

Groups of products meeting the above requirements that are potentially competitive are the following:

– Certain fruits (berries – raspberry, mulberry, cranberry; sour cherry, table grapes);

– Certain vegetables (such as red sweet pepper processed for the ethnic markets of the EU, asparagus and other labour-intensive ’niche’ products);

– Sheep and goat products (dairy, meat);

– Wine;

– Bio products.

Policy of Support and Accession – Lessons from Hungary

One of the main tasks of agricultural policy in the accession process is to promote structural adjustment necessary to successful performance in the Union market, which has to be completed up to the date of accession. The accession of Hungary has had lessons in this field that should be considered by Macedonia, too.

The Hungarian agricultural policy continued the policy of subsidies aimed at returning losses up to the moment of accession though it was well known that it was to be terminated or at least reduced. The less competitive a branch was, the more subsidies were allocated to it, which could only be influenced by the lobbying strength of the various branches and the interest groups. Instead of subsidising the potentially competitive branches by supporting investment into vegetable and fruit production, by assisting producers’ sales organisations, or the building of producers’ stores for grain, and developing the transport infrastructure, subsidies were mostly granted to obviously not competitive branches after the accession: such as pig and poultry raising, milk production, and the production of cucumber for canning, of tomato, sweet corn and apple in the vegetable and fruit branch. Thus the producers were disoriented, the accession shock was not mitigated; on the contrary, it was significantly enhanced.

Whereas a rational policy of subsidies helps the potentially competitive branches to become truly competitive after the accession, and in the presumably not competitive branches it orients the producers and prepares the way for the weaker ones to withdraw by the gradual reduction of support according to a timetable announced in advance.

At present it is impossible to answer to the question whether the Macedonian agriculture is a small tiger or just a cat. The country undoubtedly has advantages by which it may cope with the sharp international competition with some of its products, but it is feared that there are insufficient resources to take these opportunities and time is also running short.

Begegnungen
Schriftenreihe des Europa Institutes Budapest, Band 28:73–79.

NÁNDOR SCHÜTZ

The Impact of Romania’s and Bulgaria’s Accession to the European Union on Their Agricultural Economy

On 1 January 2007 two candidate countries, Romania and Bulgaria are to join the European Union, where agriculture plays a far more significant role in the economy than in the EU–10 or in the EU–15. The proportion of people employed in agriculture is 26% in Bulgaria and 32% in Romania, and the share of agriculture in the GDP is 12% in both countries. In Romania the agricultural area of the country is 14 million hectares, covering 59% of its total territory, and this would make it the seventh largest country of the Union, and the second biggest maize producer next only to France. Bulgaria’s agricultural area is 5.3 million hectares, which is 48% of its entire territory. A characteristic feature of both countries is to have fragmented holdings, the proportion of registered producers is modest compared to the number of landowners and non-market producers, and the same tendency is prevalent in Hungary, too. Agriculture is short of capital and its development requires resources.

Agriculture had been one of the decisive branches of the national economy in Romania and Bulgaria, and though its role has been declining as a natural corollary of socio-economic development, its significance cannot be challenged even today. This fact does not only assert itself in the economic area but also in social, sociological and political respects.

Where does the preparedness of Bulgaria and Romania stand today for European Union membership?

Comprehensive Monitoring Report on Bulgaria’s and Romania’s Progress towards Accession, 25 October 2005

Economic criteria

According to the assessment of the European Commission both countries meet the criteria of a functioning market economy. As regards the precondition whether they would be able to cope with the pressure caused by competition within the Union, the European Commission has stated that “the continuation of the current pace of its reform path should enable Bulgaria” and a “vigorous implementation of its structural reform programme” should enable Romania “to cope with competitive pressure and market forces within the EU”.

Issues requiring enhanced efforts

In the field of agriculture Bulgaria and Romania have to accelerate their preparations for integration into the organisations of the Single Market and for the mechanisms of foreign trade entering into force.

Areas of serious concern

Both Bulgaria and Romania have to make enhanced efforts to establish the necessary institutions and to provide them with the expert personnel required for their operation. This is a basic criterion to the payment of direct allocations, market support and reimbursements to the agricultural producers and to funds meant for rural development. It is of serious concern that the paying agencies and the Integrated Administrative and Control System (including the Land Parcel Information System /LPIS/ and the direct payment scheme to farmers) will not be fully operational by the time of accession. In case this is not solved they risk their citizens not having access to the funds of the common agricultural policy.

In both countries the veterinary legislation has to be passed and implemented urgently. Problems in this field endanger the internal market integration of animal husbandry in both countries: if these are not solved they may undermine the veterinary health system of the EU and the safety of the food chain. Progress has been particularly insufficient in the organisation of the animals identification and registration system, as well as in the development of a comprehensive veterinary inspection system of imports from third countries. The implementation of the requirements related to transmissible spongiform encephalopathy (TSEs) such as BSE, for instance, is subject to serious concern in both countries. Protection against animal diseases is of low standard in Bulgaria as well as in Romania. Separate measures may be required because of the danger of potential epidemics in order to protect other parts of the EU from diseases. There is no sufficient capacity available for the treatment of animal waste either. It is characteristic of both countries that the current pace of the modernisation of agrarian and food industry establishments would not make it possible for all of them to meet the obligations set during the course of accession negotiations. Individual measures will be introduced in the interest of public health concerning producers who do not meet the requirements, among others restrictions will be introduced for the production and sale of their goods.

Bulgaria

More than 95% of the almost ninety thousand-page material of the acquis has been translated into Bulgarian. About 60% of the translations will have to be checked by the national authorities before they could be submitted to the EU.

The country has not made satisfactory progress in the organisation of dairy products market, which could hinder the EU’s market interference into that branch, unless these shortcomings are overcome on time. The Community regulations for the trade in livestock and animal products have not been adapted, and regulations concerning animal welfare have not been fully implemented on the level of agricultural holdings, in transport and in slaughterhouses. Bulgaria has to set up new veterinary border cross points (in 2006 the building of seven new ones commenced, and should be completed by late October, apart from these only one cross point is ready at the Turkish border).

Romania

In Romania almost 60% of the acquis has been translated, but more than half of it is still to be checked.

Romania has to make significant efforts to pursue the reform of public administration, particularly to increase the expertise of public services and it has to supply proper personnel and financing to the application and implementation of the EU regulations.

Romania has to make efforts to set up payment agencies and also to build an integrated system of administration and control. (The tender for IT development was announced on 10 April 2006.) Veterinary stations will have to be built at the border cross points.

Measures to be taken by Bulgaria and Romania

Both countries will have to pay attention to the strengthening of their administrative and legal capacity to become capable of adequately implementing and monitoring the prescribed legal norms.

If we recall the last country reports on Hungary and our efforts made directly before and after our accession in order to meet the necessary conditions, to set up and operate the required institutions and systems, this situation seems familiar to us. Just as in the case of other acceding countries, the road we had to cover was not simple either.

The European Commission would publish its next report on 16 May 2006.

Accession Treaty

Transitory measures – agriculture

• Both countries. For seven years from the date of accession both countries may retain the restrictions on purchases as stipulated by its valid legal norms concerning agricultural land, forests and areas covered by forests.

• Bulgaria. Requirements concerning the fat content of milk need not be applied for consumer milk produced in Bulgaria up to 30 April 2009, in so far as it extends over the full category of the 3% fat content milk is sold in the whole-milk category and the 2% fat content milk is sold in the semi-skimmed milk category. Consumer milk not meeting the requirements of fat content can be exclusively on sale in Bulgaria or can be exported to third countries. Establishments in the dairy industry may receive fresh milk supplies not meeting the Union requirements up to 31 December 2009.

• Romania. Romania may acknowledge replanting rights obtained from the grubbing-up of hybrid varieties that may not be included in the classification of vine varieties, cultivated on an area of 30 thousand hectares These replanting rights – may only be used until 31 May 2014, and exclusively for planting with Vitis vinifera. The restructuring and conversion of these vineyards will not be eligible for Community support provided for under Article 13 of Regulation (EC) No. 1493/1999. However, national state aid may be given for the costs resulting from their restructuring and conversion. Such aid may not exceed 75% of all costs per vineyard.

A departure from the special hygienic rules of food stuff of animal origin can be permitted up to 31 December 2009 (26 meat processing factories + slaughterhouses, 28 dairies).

It is compulsory to adjust the animal farms and the quality requirements of raw milk to the Union standard up to 31 December 2009.

The use of some herbicides is permitted up to 31 December 2009, with the exception of the 2.4–D for which the deadline is 31 December 2008 as latest.

Support

• Direct payments. Similarly to the case of the countries that acceded in 2004, the introduction of direct Union support would be gradual in Romania and in Bulgaria too. In 2007, the year of accession the farmers would get 25% of the direct support level. Community financing would grow by 5% annually in the first five years after accession, next it would grow by 10% annually until it reaches 100% (in 2016).

As in the case of the countries that acceded in 2004, the EU resources can be supplemented by support from national resources up to its 30%, to reach 100% at the most.

In view of the fact that the reference yields acknowledged for grain are low, both Bulgaria and Romania would get a significantly lower per hectare support than the big grain producers of Western Europe or Hungary. On the other hand, the direct payments for grain would reach 70–80% of the total payments in this field.

• Rural development. In the case of Romania and Bulgaria these resources would be higher than the Union resources arriving there by direct payments and measures in the agricultural market. This can be traced back to a large extent to the proportionately smaller direct support. In view of the questions still open in the Union budget for 2007–2013, the exact dimension of support for rural development is not yet known.

• Sums earmarked for temporary supplementary measures for rural development to be granted to Bulgaria and Romania

1. Annually 1000 euros per unit supporting the semi-subsistence farms.

2. Supporting producer groups by 100 thousand euros in the first and second years, 80 thousand euros for the third year, 60 thousand euros for the fourth year and 50 thousand euros for the fifth year.

Chances of Accession and Its Impact

There are a number of factors that could cause transitory difficulties after the accession: catching up may be affected by a delayed support policy outlined in the Accession Treaty similarly to the new member states having acceded in 2004, with growing competition as one of its results, the priority system of the common agricultural policy not supporting pork- and poultry sectors, and the basic right to the free movement of workers introduced with certain spatial and time-wise limitations.

Accession to the EU would place the ’domestic’ Bulgarian and Romanian food market into a new dimension. The traditional elements of market protection measures (customs, quotas with reduced customs tariffs providing access to the market, and special market-safeguard measures) cannot be applied in the single internal market of the EU, therefore accession to the Community as well as the superior power of the commercial chains would result in a sharper competition and a growing pressure of import.

The extension of the Common Agricultural Policy to the Bulgarian and Romanian agriculture, the differences of the two sets of preferences, namely the priority system of the CAP not preferring pork- and poultry sectors, would lead to significant structural transformation and shift in the structure of production.

Expected advantages and effects

– The two countries would become the beneficiaries of the Common Agricultural Policy of the EU by their accession. Their producers may avail themselves of the direct land-based support, and may become beneficiaries of the support constructions registered in the Structural and Rural Development Funds of the EU within the framework of co-financed support measures. Producers can have access to significantly larger Union grants than in the previous years, right from the first year of accession.

– From the first moment of accession the Bulgarian and Romanian agricultural producers would also be covered by the measures protecting the internal market of the European Community as well as those promoting export to a third market.

– Accession would create a continuous expansion of resources during the transitory period, and would produce an investment milieu that is more favourable than the current one. The agricultural policy and market regulatory system of the EU would build a stability factor into agricultural production even after transformation that would by itself improve the competitiveness of Bulgarian and Romanian products.

– Not every branch and farm sets out with equal opportunities in this competition. The agricultural support system of the EU may launch a significant rearrangement of incomes after the accession. Entitlements for support would provoke the shrinking of certain branches and cultures. As a result of this process animal husbandry is expected to lose to the benefit of grain production, and as a result plant production may become over-emphasized compared to animal husbandry.

– Based on Hungarian experiences, the import of foodstuffs may speed up, while the growth of exports may lag behind.

– Depending on the degree of the vertical co-operation of production and on the extent of the development of logistics systems in commerce, the reaction ability of agriculture in international competition may face difficulties in the initial phase after the accession.

– It should also be kept in mind that goods of lower quality than the Union average, produced at a higher cost than by the competitors in the Union may even be squeezed out of their domestic market. It may result in significantly reduced production particularly in the so-called sensitive sectors such as pork, chicken and milk, and consequently in the growth of employment and existential problems.

– The lack of the promotion of producers’ interests in the face of the multinational commercial companies of solid capital is a tremendous problem even in the European Union. The fragmented producers’ background and the lack of a strong and united system of interest representation mean a particularly vigorous source of tension; the producers in certain branches are basically exposed to commerce.

– Certain national support constructions may be maintained even after the accession, which are aimed at handling special problems emerging in areas not regulated by the EU, or serve an early alignment of agriculture to the Community market.

*

Despite the transitory difficulties of alignment the Bulgarian and Romanian agricultural economy would get into a more favourable position by the accession. It can have access to opportunities better than ever by the direct and co-financed support of the European Union and by the predictable market conditions as well as the stable background of the Union’s institutional system. The favourable image is further improved by the system of national supplementary assistance, for the income-generating conditions of production can be significantly improved by such national additions to the direct grants, helping the farmers in coping with fierce competition.

In the future the major decisions concerning agricultural policy would be made by the EU Council of Agriculture Ministers. It, however, does not mean that a national agricultural policy, the assertion and presentation of the country’s interests are to be given up.

Accession to the Union revaluates a significant part of agricultural production, and ensures the achievement of predictable and in many cases higher prices. Prices and support jointly offer a chance to the Bulgarian and Romanian agriculture to set out to development reaping a lasting qualitative change.

Begegnungen
Schriftenreihe des Europa Institutes Budapest, Band 28:129–135.

LÁSZLÓ RUPPERT

The Impact of the Southeast-Oriented Transport of the EU on Hungary

The Balkans of hardly 40 million inhabitants cannot expect the distinguished economic attention of Hungary compared to the 460 million market of the European Union (EU). This is corroborated by the fact that Hungary has been consistently realising 75% of its export-import turnover with the EU since the mid-1990s. On the other hand, in addition to the relatively small market of the Balkans it is less than one third of the EU average in respect of its specific output capacity (GDP/head). Nevertheless, having regard to the present situation, future opportunities and challenges of transport in the region the assessment of the Balkans is changing. Traffic between the EU and the Balkans, going through Hungary is already the most marked transit direction. The engines and growth-generating resources of this traffic, however, are only partially the Balkan countries, the Turkish, Middle Eastern and Far Eastern economies have a larger share. These emerging markets demand an increasingly large network capacity and improved quality service from the Hungarian transport system for their transit shipments going to the EU.

Directions of the Flow of Goods

The main directions of Hungarian export-import in decreasing order are (Figure 1): Germany, Austria, Italy, France, Russia (in this case the import of energy resources is decisive). Currently the aggregate Hungarian export-import for and from the Balkan countries does not even reach the value of the Austrian one. Based on geographic proximity, historical relations and the raw material wealth of the Balkans, however, a faster growth of the Hungarian-Balkans trade, investment (FDI) and industrial relations is expected, particularly after Romania’s and Bulgaria’s accession to the EU. Growing relations will enhance mobility and output in cargo transport. The Danube-Kris-Mures-Tisza as well as the Danube- Drava-Sava Euroregions in contact with the Balkan countries will also strengthen and develop the organic economic and cultural relations with Hungary (Figure 2).

While the present direct economic relations do not as yet generate significant transport demand between Hungary and the Balkan countries, the Balkans is the most significant direction of traffic in Hungary. During the past years the transit lorry traffic from the direction of the Balkans, crossing the Romanian border to and from Hungary and going to Western Europe was more extensive than the traffic of all the other directions taken together (Figure 3). The proportion is nearly similar in the railway transit cargo traffic, but here transit through the Serbian border is already significant (Figure 4). Presumably after the opening of the M5 motorway in March 2006 transit traffic along highways through the Serbian border would also grow similarly to the railways. In addition to the transport of goods the guest workers from the Balkans employed in Western European countries already represent an outstanding traffic load at the Austrian-Hungarian and Hungarian-Romanian borders as well as along the domestic transit routes in the peak period of tourism and particularly at the time of longer holidays and the collective holidays of factories.

A significant part of transit traffic generated by guest workers is actually not originating from and not directed to the Balkan countries, but from Turkey crossing the Balkans. This traffic is expected to grow as a result of the associated country status of Turkey and of its becoming a full member at a time currently impossible to forecast.

The Balkans as the Gateway of Asia

From the Hungarian point of view it is the development of economic relations between the Union and Asia that would have a prominent role in the cargo traffic of the EU moving in south-eastern direction, to the Balkans or going through it and affecting Hungary. According to some forecasts more than 20% of the EU imports will come from China from the early 2010s onwards. A significant part of this Far Eastern traffic would come through the Suez Canal to the container ports of the Mediterranean and the Black Sea to be unloaded, another part of it would travel along the Asian railway lines.

A significant part of the traffic going to the central regions of the EU and coming from it may use the Hungarian road, railway and inland water routes to and from the dynamically developing port of Constanţa, the expanding Trieste and the Croatian ports. (During the past years the container ports of Rotterdam and Hamburg have found it increasingly difficult to receive the Asian container carriers. With the eastern enlargement of the EU the container ports of the Mediterranean and of the Black Sea would be revaluated. This creates new opportunities for the Balkan countries, though obviously they will get into keen competition with the Greek, Italian, French and Spanish ports.) Cargo traffic directed to the EU along the Asian railway may be a promising one for the Hungarian railways (Figure 5). Here primarily the Central international railway main line (Asia–Kiev–Záhony–Budapest–Madrid), the Southern international railway main line (China–Tashkent–Ankara–Budapest– Berlin), and the Europe–Caucasus–Asia corridor (Asia–Baku–Constanţa– Budapest) should be considered.

The decisive part of the transport of goods in Asia is container traffic, and with an intelligent transport policy, coordinated with the Balkan countries, it may promote the growth of the share of multi-modal transport.

The Hungarian Transport Network

The Hungarian transport network is already partly satisfactory for the transit traffic coming from and going to the Balkans, but several segments of it require urgent development. It is a favourable situation that of the thirty projects of the Trans-European Transport Network (TEN-T), approved by the European Commission in 2005, three strengthen the transport relations between the Balkan countries and Hungary. Project No. 7 would ensure a motorway connection in the direction of Athens– Sofia and Brasov–Nagylak respectively. To this the Hungarian M5 motorway is already in operation up to Röszke at the Serbian border, and the building tender for the M43 branch towards Szeged–Nagylak is expected to be announced soon.

It is of outstanding significance for the domestic inland water transit traffic that project No. 18 of the TEN-T wishes to make the currently narrow cross-section segments of the Danube continuously navigable. Overcoming the still critical water depth of the Danube–Maine–Rhine waterway would allow for a dynamic growth of goods traffic on the Danube between the Balkans and the central regions of the EU.

The development of the railway network by project No. 22 may also link important junctions in the Balkans (Athens–Sofia/Bucharest–Budapest–Vienna–Prague–Nuremberg).

Nevertheless, the weak points of the financing of the TEN-T project which is intended to be realised up to 2020 should be pointed out. Currently the EU would finance 15–20% of the TEN-T projects by way of grant, and the decisive part is to be allocated out of national resources. The newly acceded countries, however, may also apply for sums from the Cohesion Fund, where a 50–60% proportion can be achieved. In case the Balkan countries, including Hungary, coordinate their application aims, the three projects may be implemented, otherwise it may already be considered as an achievement if at least certain segments are realised without network homogeneity and equivalent capacity.

The 10/b Helsinki corridor, the Budapest–Kelebia railway line, a particularly important one to Hungary, does not figure among the TEN-T projects. This line already operates at the upper limit of its capacity, and will not be able to carry the Serbian traffic and that of the south-eastern peninsula of Montenegro without developing it into a dual-track one. The M6 motorway (Budapest–Osijek–Sarajevo–Adriatic) may mean the strengthening of the north-south road connection, which would link Bosnia and Croatia from the direction of the Adriatic to the central and northern regions of the EU through Hungary. Hungary shows a significant progress in building this 5/C Helsinki corridor without EU support, out of its own resources.

The Impact of the Balkans Transit

The biggest flows of transit traffic crossing Hungary are decisively of north-western–south-eastern direction. In the future goods and passenger traffic would grow dynamically towards the Balkans. Every commercial flow and route may provide benefit as well as damage to the transit countries. It is a historical lesson that flourishing cities and regions have evolved along trade routes and in their junctions.

Profit and cultural enrichment, however, is not automatic. Hungary, being in a favourable geo-political position from the angle of the Balkans traffic, may be relatively easily avoided or bypassed by the development of the transport network of the neighbouring countries. In this case the national economy would be divested of the profit obtainable from commercial flows. In an even worse case the traffic would affect the country, but because of an ill-considered policy of tariffs, or due to the lack of logistics systems and value-added services the damage caused by transit traffic (deterioration of track, environmental burden, crime, etc.) would be bigger than the income realised.

Due to these factors it is important for Hungary to have a transport policy which may profit from the Balkans transit traffic with the help of the continuous analysis of competitors (competitive market) and the (environmental and economic) monitoring of that traffic, and which may also simultaneously promote the development of the Balkan countries on the basis of mutual advantages.